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​ ​ Bearish 
 
 
 
 

O
​ ptions Strategies for Bearish view 
 
 
 
 

 
 
 
 
 
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1 Long Put 
 

 
Introduction 
 
Buying the 'Put option' is the most basic & simplest strategy. It is recommended when your outlook on the underlying 
asset is negative & you expect the underlying asset price to fall. 
 
When To Execute? 
 
When you expect a fall in the underlying asset price 
 
Trade 
 
Buy 1 lot ATM Put 
 
Maximum Profit 
 
Maximum reward remains uncapped 
 
Maximum Loss 
 
Since its a net debit trade you pay for buying the Put option upfront i.e. Premium. Your maximum risk is capped 
 
Advantages 
 
Unlimited profit potential with capped risk 
 
Possibility of greater leverage than selling naked future 
 
Disadvantages 
 
100% potential loss of premium in case of inappropriate strike, choice of stock, time decay 
 
Greater leverage could prove detrimental in case the expected outlook fails 

 
 
 
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2 Bear Call Spread 

 
Introduction 
 
Bear Call Spread is a bearish income strategy that could be executed when one expects the stock to find resistance 
at higher level 
 
When To Execute? 
 
Bear Call spread is executed when we have bearish outlook in Stock/ Index. Higher strike call outflow is funded by 
lower strike in the money Call. It is a net credit strategy 
 
Trade 
 
Buy 1 lot ATM call and Sell 1 lot deep ITM call 
 
Maximum Profit 
 
Maximum reward is limited to difference between two strikes i.e. net capital inflow. Maximum Profit arises if the 
stock closes at or below the lower strike Call resulting in both the strike ending worthless and you pocket entire initial 
inflow 
 
Maximum Loss 
 
Maximum risk is difference between both the strikes minus credit inflow received initially. Maximum loss arises when 
stock closes above higher strike Call 
 
Advantages 
 
Helps to generate sustain income if the view goes correct 
 
Can be used to repair loss making Long Call by selling lower ITM Call. Develop Limited risk, limited reward strategy 
 
Disadvantages 
 
Identifying clear area of support and resistance is essential 
 
If the stock closes above higher strike Call , one can lose money 

 
 
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3 Bear Put Spread 

 
Introduction 
 
Bear Put Spread is a bearish strategy that executed by buying a put and selling lower strike Put to fund it. It is a net 
debit strategy with limited risk to limited reward strategy 
 
When To Execute? 
 
Bull Put spread is executed when we have bearish outlook on the underlying. Instead of buying naked put with higher 
outflow, one sells lower strike Put to partially fund the outflow resulting in hedged strategy 
 
Trade 
 
Buy 1 lot ATM Put and Sell 1 lot deep OTM Put 
 
Maximum Profit 
 
Maximum reward is limited to difference in strike less net outflow. Maximum Profit arises if the stock closes at or 
below the lower put strike. Identifying clear downtrend is essential for the strategy 
 
Maximum Loss 
 
Maximum risk is limited to difference in cost of long and short Put. Breakeven for the strategy would be higher strike 
minus net outflow 
 
Advantages 
 
Helps to participate in bearish stock with relatively low cost 
 
Reduced risk, cost, and breakeven point for a medium- to long-term bearish trade as compared to buying a Put alone 
 
Disadvantages 
 
Capped profit if the stock falls below lower strike 
 
Identifying clear area of support and selection of strike becomes very important 
 

 
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4.Bull Put Ladder 

 
Introduction 
 
Bull Put Ladder is a bearish strategy. It ensures uncapped reward if the stock tanks 
 
When To Execute? 
 
Strategy could be executed for a capital gain. The lower strike bought puts will have the effect of uncapping your 
profit potential; the higher strike sold puts will reduce the cost basis. 
 
Trade 
 
Sell 1 lot ITM Put, Buy 1 lot OTM Put and Buy 1 lot deeper OTM Put 1 lot 
 
Maximum Profit 
 
It is a Net debit strategy. Maximum Profit is unlimited beyond lowest put strike. Your maximum reward on the trade is 
uncapped because you are buying more puts than you are selling. 
 
Maximum Loss 
 
Maximum Loss on the trade is limited to the difference between the higher and middle strike prices plus your interim 
risk. 
 
Advantages 
 
Bull Put Ladder will be safest to choose as a medium to long term to expiration to allow the underlying asset to move 
and make the position profitable without time decay destroying the long options 
 
Typically a Bull Put Ladder arises when a Bull Put Spread has gone wrong and the trader adjusts the position to 
become bearish 
 
Disadvantages 
 
 
Time decay is generally harmful when the position is losing money, particularly around the middle strik

 
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5 Put Ratio Back spread 

 
Introduction 
 
Put Ratio back spread is extremely Bearish strategy that expects high volatility in the stocks. It requires stock to 
plummets sharply downwards 
 
When To Execute? 
 
Put Ratio Back spread is an extremely bearish strategy that is form with little or no net cost thereby reducing overall 
risk . It requires aggressive downward move in the stock 
 
Trade 
 
Sell 1/2 ATM Put and Buy 2/3 OTM Put. Net cost to establish the strategy is very low 
 
Maximum Profit 
 
Maximum Profit is unlimited if the stock moves below lower strike Put. 
 
Maximum Loss 
 
Maximum loss is difference between the strike plus net outflow or less net inflow 
 
Advantages 
 
1.Reduced cost of formulating the strategy 2.In scenario where implied volatility of Put is rising, it provides limited 
risk 3.Generates higher return in scenario where stock falls exponentially 
 
Disadvantages 
 
1.Loss could be higher if the stock doesnt give desired downward movement. 2. Not meant for an intermediate trader 
2. Time decay could be harmful to the strategy as we are net long 2. Strike selection becomes key to succes 
 
 
 
 
 
 
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6 Long Put Butterfly 

 
Introduction 
 
Long Put Butterfly is a range bound strategy that offers decent reward/risk along with low cost 
 
When To Execute? 
 
Long Put Butterfly is recommended when the trader is looking to execute a potentially high-yielding 
trade at very low cost, where your maximum profits occur if the stock is at the middle strike price at 
expiration. One is anticipating very low volatility in the stock price. In scanraio where strike diffence is 
not equal it is known as Modifien Put Butterfly Spread 
 
Trade 
 
Buy 1 lot ITM Put, Sell 2 lots ATM Puts and Buy 1 lot OTM Put 
 
Maximum Profit 
 
This is a net debit trade, although the net cost is typically low. Maximum risk is the net debit of the 
bought and sold options. Maximum reward is the difference between adjacent strike prices less the net 
debit. (Strikes are equip-distance from each other). 
 
Maximum Loss 
 
It is Net debit Strategy. However Net cost to establish is very low 
 
Advantages 
 
It helps to participate in high yielding trade with relatively low cost. By being completely hedge one can 
hold to the short position till expiry. Promising Reward to risk provides good odds to wins as stock has 
ample room to fall. 
 
Disadvantages 
 
Time decay is generally harmful when stock is near first strike or third strike and beneficial if stock price 
is near middle strike. Maximum loss is capped. Strike selection is a key to garner maximum benefit. 
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7.Short Call 

 
Introduction 
 
Shorting a Call option is a simple but risky strategy & hence qualified as an advanced strategy. It is 
recommended when the price of the underlying asset is expected to fall & the certainty of a rise is ruled 
out 
 
When To Execute? 
 
When you expect a fall in the underlying asset price with more degree of conviction 
 
Trade 
 
Sell 1 lot OTM Call 
 
Maximum Profit 
 
Profit limited to the call premium 
 
Maximum Loss 
 
Selling options exposes you to uncapped risk where potential loss could be heavy incase the directional 
momentum is reversed 
 
Advantages 
 
Profits from falling or range bound stocks 
 
Income strategy & could be deployed against cash holdings 
 
Disadvantages 
 
Uncapped risk & a failure could result into huge losses 
 
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8.Bear Put Ladder 

 
Introduction 
 
The Bear Put Ladder is an extension to the Bear Put Spread. By selling another Put at a lower strike, the position 
is exposed to uncapped risk if the stock falls very fast 
 
When To Execute? 
 
Bear Put Ladder is to be executed when the trader is mildly bearish for the stock. Premium earned from selling 
two below strike puts helps to reduce initial outflow. Strategy is mildly bearish. 
 
Trade 
 
Buy 1 lot ATM Put, Sell1 lot lower OTM Put, Sell 1 lot lower deep OTM Put ( All equal quantity) 
 
Maximum Profit 
 
Maximum Profit is limited between two OTM Puts. It is difference between higher strike and middle strike less 
net premium outflow 
 
Maximum Loss 
 
Strategy has two BEP points. Loss is limited to initial outflow if the stock closes above higher put strike. However 
loss is unlimited below lowest strike put 
 
Advantages 
 
Lower cost and better breakeven point compare to Bear Put Spread. Idle to participate in the stock where 
downside is limited. Faster time decay could be beneficial for the strategy. 
 
Disadvantages 
 
Uncapped downside if the stock falls 
 
Strategy is ideally meant for advance trader due to risk exposed. 
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9 Ratio Put Spread 

 
Introduction 
 
Ratio Put Spread is Neutral to Mildly bearish Strategy. In this we expect stock to fall gradually near the lower 
strike Put but not much below it. 
 
When To Execute? 
 
When you expect decrease in volatility with stock price remaining range bound. 
 
Trade 
 
Buy 1 lot ATM Puts and Sell 2 lots OTM Puts with same expiration date 
 
Maximum Profit 
 
Maximum Profit is limited to the difference between the strikes plus( the net credit received) or minus( net debit 
paid) all multiplied by net long contracts. 
 
Maximum Loss 
 
Maximum Loss is unlimited below lower breakeven point as you are short in more option then being long. 
 
Advantages 
 
Net credit received acts as a cushion for fast downside movement in stock. Profitable when stock remains range 
bound between two strikes as it has higher theta gain 
 
Disadvantages 
 
Uncapped risk if stock falls below lower BEP. Managing the trade if stock falls too fast too early. Comparatively 
complicated trade for intermediate traders. 
 
 
Its expensive to build Guts as both options are ITM